Shell exits Russian Arctic oil venture deal formed with Gazprom Neft

Royal Dutch Shell, commonly known as Shell, has recently decided to withdraw from the deal on Meretoyakha Neftegaz, a Russian Arctic oil joint venture, due to some external factors. The deal was previously expected to be formed with Gazprom Neft. Gazprom Neft has valued the total resources at the fields of Meretoyakha Neftegaz at 1.1 billion tons of oil (nearly 8 billion barrels of oil).
Headquartered at St. Petersburg, Gazprom Neft is the 3rd largest producer of oil and the subsidiary of Gazprom in Russia.
The decision of the oil and gas company, Shell, to back out from the deal of establishing a joint venture was carried out in the wake of coronavirus pandemic that has been disrupting the global economy worldwide. Due to the outbreak, a weak demand for oil and gas has been observed, which leads to the drop of global investments into various energy projects.
Therefore, the company has reportedly declared in a statement regarding its inability to pursue the completion of the joint venture deal based on the Meretoyakha Neftegaz, due to the challenging external environments and economic downturn caused by the COVID-19 outbreak. The deal was initially set up for a 50/50 joint venture to extract oil in the region of Yamal-Nenets. It was signed in 2019 at a business forum in Russia and was expected to be completed by the beginning of 2020.
The key production region of oil and gas in Russia is Yamal, which accounts for up to 1/5th of the global natural gas reserves. Despite Shell’s withdrawal from the oil join venture deal, Gazprom Neft is planning to independently pursue the project development in accordance with the previously approved work plan.
Shell and Gazprom Neft are still involved in an oil project named Salym Petroleum Development in Russia.
Source credits:
https://www.reuters.com/article/shell-russia-oil/shell-ditches-russian-arctic-oil-joint-project-idUSL5N2C13DV